[Automotive News] The number of applicants getting turned down for credit reached its highest level in five years, according to a recent Federal Reserve study. The rejection rate for loan applications is at 21.8 percent for the past 12 months including June; for automotive loans it was 14.2 percent — a new high — up from 9.1 percent in February.
Rising interest rates and cautious lenders concerned about delinquencies are two potential factors for the steep rejection rates for Americans applying for credit. The increase is across all age groups and is highest among those with credit scores below 680.
The high rejection rate for auto loans is a challenge for prospective buyers, and in turn, dealerships. "Some lenders have become much more cautious in their underwriting practices," said Sam D'Arc, COO of Zeigler Auto Group. But being rejected may not come as a surprise for some borrowers. That's because an applicant's expectation that their loan would be rejected is also at an all-time high. Almost one-third of hopeful borrowers expected to be turned down for an auto loan.
According to a Federal Reserve quarterly survey of bank senior loan officers, 39 percent of banks polled in April expected to toughen lending at some point between the survey date and the end of the year. Also, 29 percent of banks had tightened their auto loan standards in the three months before the April survey.
Overall, credit applications declined to the lowest level since October 2020. The average reported probability a loan application is rejected rose for all loan types. The probability grew to 30.7 percent for auto loans, 32.8 percent for credit cards, 42.4 percent for credit limit increase requests, 46.1 percent for mortgages and 29.6 percent for mortgage refinance applications. The results for auto loans, mortgages and credit card limit increase requests are new highs.
As of July 1, minimum wage for businesses in Chicago with 21 or more employees become $15.80 an hour. For smaller businesses with 4 to 20 employees, the rate is $15.
Large companies with tipped employees must pay at least $9.48 per hour, and tipped employees at smaller businesses receive at least $9 an hour.
Cook County had a similar minimum wage increase July 1. The minimum wage for businesses inside Cook County but outside of Chicago increased to $13.70 an hour for non-tipped workers and $8 an hour for workers who earn tips.
The county says the ordinance applies to hourly, salaried, and tipped employees over the age of 18, working in Cook County, even those who may be working within Cook County to make deliveries or driving within the County limits.
The minimum wage in greater Illinois is $13 an hour for workers 18 and older.
The CATA is excited to introduce a brand-new logo. Approved by the CATA Executive Committee last week, the freshened CATA logo reflects a modernized look and is symbolic of the association in the following ways:
The design was executed by Chicago Auto Show graphics partner MADMAXMAR, a local strategic marketing company. MADMAXMAR has worked with the Chicago Auto Show in creating the official poster and digital, print and outdoor marketing for five years.
“It has been decades since the last CATA logo was created, and it was time for a change,” said Chicago Automobile Trade Association Co-President Jennifer Morand. “The new CATA logo is symbolic of the many elements that make up the fabric of this wonderful organization. The entire process was grounded in strategy, and we’re thankful to our partners at MADMAXMAR for helping our vision become a reality.”
Over the next few weeks, the CATA will distribute brand guidelines and standards for its logo usage. Dealers and Allied Members may continue to use the former CATA logo on items currently printed.
In addition, the CATA will roll out freshened logos for its other entities such as the Chicago Auto Show, First Look for Charity, Chicago Drives Electric and DriveChicago.com.
VISA has revised and implemented new rules around “processing fees” that may be applied to credit-card transactions. Dealers who do not follow these new rules are subject to dismissal by VISA (and other credit-card companies). The basics of the new rules are the following:
These rules, as well as applicable signage, should have been provided to dealerships by their credit card processing partners. The NADA is hosting an informational webinar titled, The Truth about Credit Card Surcharging and CSL on Wednesday, July 12. Click here for more information.
On June 24, the CATA received information from authorities that auto dealers may again be targeted for mass vehicle thefts. Online chatter from a group that has targeted dealerships in the past had recently increased and it is possible that this group may be mobilizing to steal vehicles from dealers in the immediate future.
Indeed, on June 26, a CATA dealer was the victim of an attempted theft. A southwest suburban dealer thwarted a theft attempt was made at their dealership today around the lunch hour. The male suspect was fully covered (hood, mask and gloves). He was driving a blue Dodge Charger with the following dealer plate number: DL 2181 O. Please continue to be vigilant and take proper precautions to secure the vehicles on your lot.
With auto theft again on the rise, discouraging thieves from entering your dealership site in the first place is the best way to protect your cars. CATA partnered with Trydon over a year ago when it first saw how ChaseLight reacts to afterhours trespassers and encourages you to consider incorporating their programmable lighting controllers on your outdoor light poles. Click here to see ChaseLight in action and review the attachment for more information and how to contact Trydon.
New Vehicle Sales Rise on Strong Demand, Better Supply
New vehicle sales in the United States for top global automakers rose in the second quarter on improving supply and strong demand, signaling that rising interest rates have not yet had a meaningful impact on purchases. Vehicle production took a hit after the pandemic disrupted supply of semiconductor chips and other raw materials, hurting automakers' ability to meet the upsurge for personal transport.
For more information, click here. (NADA)
House Subcommittee Votes to Defund FTC’s “Vehicle Shopping Rule”
In late June, a House appropriations subcommittee included language in a broad spending bill that would stop the Federal Trade Commission (FTC) from finalizing, implementing, or enforcing the Motor Vehicle Dealers Trade Regulation Rule (“Vehicle Shopping Rule”). This language is an essential first step for Congress to use its oversight authority and “power of the purse” to protect consumers and dealers from a flawed proposed rule that would needlessly impose unnecessary burdens and costs.
The NADA-backed provision was included in the House Financial Services and General Government (FSGG) Appropriations bill, and the next step is full House Appropriations Committee consideration. Preserving this appropriations language through the House and Senate appropriations process will be a top NADA legislative priority.
NADA, AIADA and NAMAD sent a letter of support to the FSGG Subcommittee highlighting the flaws of the proposed “Vehicle Shopping Rule” and cited the recent Center for Automotive Research study, which states that the FTC’s rule would cost consumers $38 billion.
NADA Legislative staff thanks the dealers and ATAEs who helped gain the critical support of appropriations subcommittee members. We anticipate the FTC appropriations bill will be a key issue during the upcoming Washington Conference, scheduled for September 12-13.
Can You Record Customers?
Questions about the legal implications of recording customers and employees raise complicated, but increasingly relevant issues that are driven largely by state law and practical considerations rather than by federal law.
Read the full NADA article here.
Ninety percent of auto dealers take a property and casualty quote once every two years. When asked why, Dealer Principals, Controllers, and Vice Presidents state that it’s because they’re looking to “keep their incumbent honest” and that they’re perpetually on the hunt for “better coverage.” However, in the end, for better or for worse, it often comes down to price when it’s time to make the final decision. This creates an extremely competitive property and casualty environment, which is highly beneficial to the dealer body. Because of the accessible nature of this competitive arena, Dealer Principals will spend eight to sixteen hours in an attempt to save ten percent on their annual premium.
Now imagine if dealers treated their F&I providers the same way, and how much better their level of service would be! Instead, Dealer Principals often go five, 10, 15 or even 25 years between looking at F&I providers--a key area of their variable operations vertical that is responsible for driving millions of dollars a year in profit. By allocating just ninety minutes every two years to taking an F&I proposal from another F&I provider, the dealer body could create a similarly competitive environment in the F&I space.
Worst case scenario, by taking a proposal, dealers see their incumbent provider step up their level of engagement, gain insight into cutting-edge industry intel, and gain access to competitive administrative fee structures.
For more information, email Mario Bova at Zurich.
Thank you to the 36 CATA dealers that responded to the recent Fourth of July survey. Of those 36 dealers, 34 reported that they would be closed. Both dealers that said they would be open and reported that they will be operating with shortened hours. All 36 dealers reported that service departments would be closed.
For dealers that have union service departments managed by the Local 701 contract, July 4 is an observed holiday. The other observed holidays in the agreement include New Year’s Day, Memorial Day, Labor Day, Thanksgiving Day, Christmas Eve and Christmas Day. When any one of the above-mentioned holidays falls within or is observed during the work week, employees working on the inventive bases shall be paid 8 or 10 hours, whichever applies, times their applicable rate of pay. Employees employed on an hourly rate shall be paid 8 or 10 hours, whichever applies, times their applicable rate of pay. No holiday pay shall be paid unless the employee works his scheduled workday.
Kelly Webb Roberts, of Webb Automotive Group, was recently elected as the 2023-2024 Chicago Automobile Trade Association (CATA) chairwoman and the 2024 Chicago Auto Show co-chairwoman, making her the first female to hold that position. Webb Roberts will lead a board of 12 dealers and succeeds JC Phelan, who is serving as chairman of the 2024 Chicago Auto Show.
Webb Roberts, comes from a multi-generation automobile family and presides over five dealerships with her family. Webb Roberts was named one of Automotive News’ 40 Under 40 in 2017, and is involved with the General Motors Women’s Retail Network. With the Webb Auto Group, she actively supports Making Strides Against Breast Cancer with the American Cancer Society, Ann and Robert H. Lurie Childrens Hospital, the Alzheimer’s Association, USO, Toys for Tots, in addition to numerous local community organizations.
“The CATA's unwavering commitment to excellence in automotive retailing has been its core value for more than a century. Franchised, new-car dealers are a driving force for local communities, both economically and philanthropically. Our dealerships provide meaningful employment, offer support to local charities and civic organizations, and keep the state of transportation moving forward,” said Webb Roberts. “The CATA, one of the oldest and largest metropolitan dealer associations in the nation, brings our dealerships together with a collective voice and provides resources to help dealers run more effectively. As the Chairwoman of the CATA, I am honored to lead and champion our collective efforts towards continued growth and success.”
Additional executive board officer announcements include: Vice Chairman Jason Roberts, Advantage Acura of Naperville, Advantage Chevrolet, Bolingbrook, Advantage Chevrolet in Bridgeview, Advantage Chevrolet, Hodgkins, Advantage Toyota, Calumet City; Treasurer Ryan Kelly, Kelly Nissan; and Secretary Steve Phillipos, Chevrolet of Homewood, Ford of Homewood. David Sloan and Jennifer Morand remain the association co-presidents and Chicago Auto Show co-general managers.
As part of the CATA elections, incumbents Dan Heller (Heller Ford, El Paso; Heller Lincoln-Chrysler-Dodge-Jeep-Ram, Pontiac), Steve Phillipos, Dan Marquardt (Marquardt Buick GMC of Barrington), and Kelly Webb Roberts (Webb Chevrolet, Oak Lawn; Webb Chevrolet, Plainfield; Genesis of Highland, Indiana; Webb Hyundai of Highland, Indiana; and Webb Hyundai of Merrillville, Indiana) return to serve another three-year term.
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